Defining to Identify: How Best to Spot a Vulnerable Customer

Author: Simon Cadbury

In my previous blog, I discussed why vulnerability has become important. Read on to discover how to tackle two very important questions…

Defining vulnerability is difficult at the best of times. When it comes to debt collection – always a sensitive situation – the ability to properly define and identify vulnerable customers is hugely important. And for the frontline staff who deal with these customers daily, navigating this territory can represent a considerable challenge.

In a bid to improve processes, many organisations are now augmenting their traditional methods with digital strategies. But finding the right approach can be difficult, with organisations struggling to strike a balance between identifying vulnerability and invading a customer’s privacy.

No Single Definition

The Financial Conduct Authority (FCA) defines a vulnerable customer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”. This is not, however, the only definition available; everyone from Ofgem to Consumer Focus and Ofcom has attempted to define vulnerable customers. And with no universal definition, confusion reigns across the industry.

Clearly, this shows us that the concept of vulnerability is somewhat fluid. Although products and services are important, defining vulnerability should therefore rely on contextual cues, including both personal characteristics and environmental factors.

And if vulnerability is caused by a combination of factors, including the situation, businesses must ask themselves, what is causing the vulnerable situation? In the case of financial services, we are referring to customers who may suffer financial harm because of impaired decision-making, and who are at risk of being treated unfairly, exploited, or worse.

Spotting the Vulnerable

Once you’ve defined vulnerability, the next step is to ensure that it can be quickly identified. Procedures like TEXAS and IDEA are commonly used to spot a vulnerable customer, however these are non-digital and involve identification based on person-to-person conversation. Importantly, we should recognise that digital is not necessarily the complete answer – of the 7.1m adults in the UK that had never used the internet in May 2013, over half were disabled (3.7m) and nearly half were over 75 years of age (3.1m). Digital can, however, help support in other ways.

For those members of the population who are more digitally savvy, offering the ability to self-identify could provide a less invasive way of supporting customers who may not be willing to discuss issues in person. Once a customer has self-identified, appropriate information can then be provided – whether it be presenting multiple options for debt payment, requesting further information from a financial adviser, or providing a link to third-party money management charities. Monitoring the use of accessibility tools can also help identify potentially vulnerable customers, and is reasonably straightforward and easy to implement.

The elephant in the room is privacy. Where do we draw the line when using customer data for such a personal issue? The impending GDPR regulations will play a vital role in ensuring the protection of customer data. The key update will be ensuring that organisations secure consumer consent to use the data, or alerting customers that they may be contacted if they identify themselves as vulnerable. For business looking to move processes online, GDPR will be a hugely important consideration.

This is an issue that must be addressed quickly: 50 per cent of adults with debt problems have a mental health problem, so correctly defining and identifying these customers is essential. Vulnerability is challenging, and definitions need to be fluid and based on several contextual factors. Digital-only is not the right approach – but integrating a full debt collections solution can go a long way to addressing the difficulties. Combining traditional methods with a digital customer journey will be a win-win for businesses and customers.

26 Jul 2017

Author: Simon Cadbury

In my previous blog, I discussed why vulnerability has become important. Read on to discover how to tackle two very important questions…

Defining vulnerability is difficult at the best of times. When it comes to debt collection – always a sensitive situation – the ability to properly define and identify vulnerable customers is hugely important. And for the frontline staff who deal with these customers daily, navigating this territory can represent a considerable challenge.

In a bid to improve processes, many organisations are now augmenting their traditional methods with digital strategies. But finding the right approach can be difficult, with organisations struggling to strike a balance between identifying vulnerability and invading a customer’s privacy.

No Single Definition

The Financial Conduct Authority (FCA) defines a vulnerable customer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”. This is not, however, the only definition available; everyone from Ofgem to Consumer Focus and Ofcom has attempted to define vulnerable customers. And with no universal definition, confusion reigns across the industry.

Clearly, this shows us that the concept of vulnerability is somewhat fluid. Although products and services are important, defining vulnerability should therefore rely on contextual cues, including both personal characteristics and environmental factors.

And if vulnerability is caused by a combination of factors, including the situation, businesses must ask themselves, what is causing the vulnerable situation? In the case of financial services, we are referring to customers who may suffer financial harm because of impaired decision-making, and who are at risk of being treated unfairly, exploited, or worse.

Spotting the Vulnerable

Once you’ve defined vulnerability, the next step is to ensure that it can be quickly identified. Procedures like TEXAS and IDEA are commonly used to spot a vulnerable customer, however these are non-digital and involve identification based on person-to-person conversation. Importantly, we should recognise that digital is not necessarily the complete answer – of the 7.1m adults in the UK that had never used the internet in May 2013, over half were disabled (3.7m) and nearly half were over 75 years of age (3.1m). Digital can, however, help support in other ways.

For those members of the population who are more digitally savvy, offering the ability to self-identify could provide a less invasive way of supporting customers who may not be willing to discuss issues in person. Once a customer has self-identified, appropriate information can then be provided – whether it be presenting multiple options for debt payment, requesting further information from a financial adviser, or providing a link to third-party money management charities. Monitoring the use of accessibility tools can also help identify potentially vulnerable customers, and is reasonably straightforward and easy to implement.

The elephant in the room is privacy. Where do we draw the line when using customer data for such a personal issue? The impending GDPR regulations will play a vital role in ensuring the protection of customer data. The key update will be ensuring that organisations secure consumer consent to use the data, or alerting customers that they may be contacted if they identify themselves as vulnerable. For business looking to move processes online, GDPR will be a hugely important consideration.

This is an issue that must be addressed quickly: 50 per cent of adults with debt problems have a mental health problem, so correctly defining and identifying these customers is essential. Vulnerability is challenging, and definitions need to be fluid and based on several contextual factors. Digital-only is not the right approach – but integrating a full debt collections solution can go a long way to addressing the difficulties. Combining traditional methods with a digital customer journey will be a win-win for businesses and customers.